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Cold Deluge, Hot Results

Before you all run to Google to define deluge, let me just tell you it’s another word for avalanche. You’re welcome. We will come back to this shortly.

Let’s talk about debt for a minute. You know I hate debt, but I L.O.V.E. talking about how to get OUT of it. Call me crazy, but I think budgeting to become debt free is a rush. It’s probably not going to give you the same shot of adrenaline that trying to outrun a large amount of snow, ice, and rocks careening down the hillside at you will, but, hey, you never know.

Now back to mountainous winter disasters.

In the finance world, there is a term called “debt avalanche.” It’s defined as paying off your debts in order from the highest interest rate to the lowest, regardless of balance. It’s also known by another term called “debt stacking”. The other icy financial term we are going to discuss is “debt snowballing,” and that is where you pay off your debts in order from lowest balance to highest, regardless of the interest rate.

Which is better? It depends on the type of person you are. If you’re a stickler for pennies and are very good at tracking them, then the avalanche or stacking methods would probably be better for you. I am going to go out on a proverbial limb here and say that most people would probably find the debt snowball method to be a little easier and more satisfying–you see results (as in paid off debts) faster, and that is a thrill in and of itself.

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